As a Money Coach I see this all the time – business owners paying themselves a wage but still struggling with personal cash flow. Before you know it they’re dipping back into the business to cover expenses, creating a cycle that strains both their personal and business finances.

The Reality Check

A lot of business owners stumble into a cycle they don’t even realise they are in – taking money from the business only to find their personal bank account empty again and needing to pull out even more. It might feel like a quick fix but it’s really putting serious strain on the business and holding it back.

The one pattern I see over and over is when I ask clients about their monthly expenses, they almost always underestimate them – often by 30% or more. Seeing the REAL numbers can be a shock, but it’s the first step towards breaking the cycle and taking control of your financial world and that of your business.

The Ripple Effect

In Australia, cash flow issues are one of the biggest reasons businesses fail – nearly half of insolvencies come down to poor cash flow management. When your personal finances are not in check, it puts even more cash flow pressure on your business to cover the gaps.

The numbers speak for themselves – According to ASIC, 52% of company insolvencies are due to inadequate cash flow or overspending. Furthermore, ABS data shows that 48% of small businesses don’t make it past their first three years, with financial management playing a huge role.

That’s why staying onto of both personal and business cash flow is critical – it’s the difference between survival and success.

 

 

Four Tips to Break The Cycle

  1. Get Serious About Personal Budgeting:  Whether it’s a simple spreadsheet or a budgeting app, just make a start. Categorise your spending, set realistic limits and check in weekly to ensure you stay on track.
  2. Keep Personal and Business Finances Seperate: Your business isn’t your personal ATM. Set up seperate bank accounts and pay yourself a regular fixed wage. This will make managing your money (both personal and business) so much easier as well as at tax time.
  3. Build a Personal Safety Net : Aim for 3 – 6 months of living expenses in a seperate bank account. Having this buffer means you won’t have to raid your business funds when unexpected personal expenses pop up.
  4. Does Your Wage Cover Your Living Expenses?: Even with a budget, if you’re constantly short on cash you may not be paying yourself enough. If your business can’t afford to increase your wage, it’s time to look at ways to unlock more cash flow and improve profitability – your business should be working for you NOT the other way around.

 

 

As I’ve seen time and time again with my clients, taking control of your personal finances creates a stronger foundation for both your life and your business. It’s never too late to make changes and break the cycle of financial stress – small steps can lead to big results.

 

What’s one thing from the list you can implement right now to start making a difference?

 

If you would like some support to get your personal finances sorted book in a time to have a chat – I’m here to help.